Economics

Chart of the Day: The ‘Decline of Manufacturing’ Is a Global Phenomenon

We hear all the time from Donald Trump and others that “nothing is made in America anymore” because all of the U.S. manufacturing jobs have supposedly vanished to China, Mexico, and South Korea. The underlying, but false, assumption of those claims is that if the manufacturing base is shrinking in the United States, those losses here must be accompanied by offsetting gains in manufacturing output and employment somewhere else in the world.

While it’s true that there has been a gradual decline in U.S. manufacturing’s share of gross domestic product (GDP) over time, the chart above shows that the downward trend is not at all unique to the United States but is in fact a truly global phenomenon. Based on international data from the United Nations, global manufacturing output as a share of world GDP fell from 27 percent in 1970 to less than 17 percent by 2009. During that same period, the trend in the United States was very similar, with the manufacturing/GDP share here falling from 24.5 percent to 12.9 percent.

Bottom Line: The declining share of manufacturing’s contribution to GDP reflects a global trend as the entire world moves increasingly towards a more services-intensive global economy. When people complain that “nothing is made here anymore,” it’s not really true that somebody else is manufacturing the goods that we used to make in America. The reality is that because of ongoing gains in productivity and lower prices, we (and others around the world) just don’t need to spend as much on manufactured goods any more in relation to the overall size of the economy. And we’re all better off because of that global “decline in manufacturing.”

9 thoughts on “Chart of the Day: The ‘Decline of Manufacturing’ Is a Global Phenomenon

  1. The vertical axis doesn’t go all the way to 0. You make it look like a drop of a couple hundred percent when it really dropped only 50%. I expected more from the AEI blog.

  2. As the world population grows, and as the world economy grows, people will always first and foremost need the essential items of daily life– socks, shoes, plates, forks, toothbrushes, a computer (if they can afford it). The world does not run on intangible services. Manufacturing will always drive the economy. The question is whether the U.S. will continue to have a share of that value-added economy, or fritter it away.

    • You can rework your comment to “prove” that industry is not important but that it’s agriculture that “will always drive the economy”. After all, one does not care much about forks if there is no food.

  3. This chart is misleading. A better way to look at this is to show how much overall GDP as grown, but that manufacturing has grown slower than overall GDP.

    • That’s the same thing! The world’s cost to manufacture what we need has gone down steadily through process improvements and reduction in wasted materials. This is a sign of progress. 70% of our workers used to be involved in agriculture, but now no one (intelligent) argues for more jobs in agriculture!

  4. I believe the author may be the person I heard about that did an economic study of a flea. He fired a pistol next to the flea and found that it jumped 6 inches. Next, he removed two of the flea’s six legs and fired again noting that it jumped only 4 inches. Finally, after removing the remaining legs, he fired again and the flea did not jump at all. His conclusion after careful consideration was that the flea has six ears, one in each leg. Removing all the legs made the flea essentially deaf and therefore it did not react to the pistol’s noise. Mr. Perry’s conclusion about manufacturing make about as much sense.

    • I don’t know who you are but that is one terrific story that in my mind sums up our government! I intend to steal it from you once I stop laughing….

  5. Manufacturing is following the same advances we have seen in agriculture. In the past most people farmed to feed themselves. Technological advances have reduced the numbers of us who work the land to a couple percent of the U.S. population, which feeds a significant portion of the world. Application of the advances in manufacturing technology result in less than 10% of the population able to produce all of the goods the rest of us need. We are victims of our own success.

    Food and goods are a required foundation for society, but no longer require the labor they once did.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>